Why Alcatel Lucent SA Jumped 16% in May

By Anders BylundFool.com

ALU Total Return Price data by YCharts

What: Shares of telecom-grade networking equipment maker Alcatel Lucent soared 16% higher in May, according to data from S&P Capital IQ. Nokia is in the process of buying the company in a $16 billion all-stock merger, so Alcatel's shares move when Nokia sneezes. In this case, the Finnish telecom networking specialist bounced back from a disappointing earnings report. Since the deal was properly announced, the two stocks have traded nearly in lockstep.

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So what: Alcatel Lucent shares fell as much as 12% on Nokia's bad report, while Nokia shares dipped slightly lower at 12.8%. This happened on the last day of April trading, setting both stocks up for a quick rebound -- which happened when Nokia started shopping for buyers of Nokia HERE, its digital mapping service. Selling that unit could add $4 billion or more to Nokia's coffers, amid a reported bidding war behind closed doors.

Now what: Nokia CEO Rajeev Suri admitted that HERE had attracted "significant interest," but also said that the company would not sell its mapping division unless he received "the right value."

It's not like Alcatel has been sitting on its hands while Nokia makes business moves, by the way. In May alone, the company tested a new high-speed fiber networking platform in the Czech Republic, signed a next-generation wireless networking contract in South Korea, laid plans for extremely fast fiber bundles across the Pacific Ocean, and more. But none of these initiatives moved Alcatel Lucent's shares, as the stock is now tied at the hip to Nokia's.

So unless this merger falls apart before its planned closing in 2016, Alcatel investors must pay close attention to what Nokia is doing. May was a great example of this new reality.

The article Why Alcatel Lucent SA Jumped 16% in May originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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